What's the difference between an employee and an independent contractor?
Employee
Under
common-law rules, anyone who performs a service for an employer is
considered an employee if the employer can control what will be done and
how it will be done. This is true even if the employer gives the
employee freedom of action. What is important is that the employer has
the right to control the details of how the services are performed.
Independent Contractor
Individuals
such as doctors, dentists, lawyers, veterinarians, accountants,
contractors, etc. who offer their services to the general public are
generally considered independent contractors. However, whether these
individuals are always considered independent contractors depends on the
facts of each case. The general rule is that an individual is
considered an independent contractor if the payer has the right to
control or direct only the result of the work and not what will be done
and how it will be done.
An individual is not an
independent contractor if he/she performs services that can be
controlled by an employer. This applies even if the individual is given
freedom of action.
Why does this matter?
If
an individual is considered an employee, then the employer must
withhold federal income tax, pay Social Security and Medicare taxes, and
pay unemployment tax on wages paid to an employee. An employer does
not generally have to withhold or pay any taxes on payments to
independent contractors.
Consequences for Treating an Employee as an Independent Contractor
If
an employer classifies an employee as an independent contractor and has
no reasonable basis for doing so, the employer may be held liable for
employment taxes for that worker. Also, if an employee is misclassified
as an independent contractor, the employee can file Social Security and
Medicare tax forms to gain relief.
If you are victim of employment related problems, contact Ambuter Law for your free case evaluation.
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